Sunday, September 30, 2018

MFI Monthly Tracking Portfolio - 9/29/2017

MFI Monthly Tracking Portfolio - 9/29/2017

I'm running my first ever 1/2 marathon in October, so a running track seems appropriate (Hartford).  Just want to finish and run the whole way before they start closing things down.

Another month/year has flown by. And so it is time to look at another monthly tracking portfolio as we hit the end of September 2018.  As my faithful readers know, I have been tracking the Magic Formula Stocks as described by Joel Greenblatt in The Little Book That Beats the Stock Market since January 2006.  Every month I take the top 50 stocks over $100m market cap from his website and track how that portfolio of stocks fares versus the Russell 3000 for the next 12 months.  It has been an uphill struggle as the tracking portfolios have under-performed, driven in part by Chinese reverse merger fiascos, for-profit education stocks and home health care stocks all being proverbial albatrosses.

People ask, does MFI not work anymore?  I am not sure. Perhaps 12 years isn't long enough. Perhaps it works better at a higher market cap cut off (I believe this to be true).  I think too many stocks make the screen over the years by "mistake"... that is they are not true value/cheap stocks. In 2011, we had a bunch of Chinese Reverse Merger stocks that hurt that year and were out and out frauds.  Then we have also had a number of stocks that have a one time spike in earnings that fools the formula.  Frankly, it might do better if instead of a trailing 12 month income look, it used a trailing 24 month look on income, to filter out the one time spikes.

But even with that being said, Value stocks have not exactly been in favor the past couple of years, although this appears to be changing (although painstakingly slowly).

Onward

 Fearless readers will recall we had a 29 month "losing streak"..  Then we had a 13 month winning streak. Now we have our second straight win (after a 10 month losing streak), winning 20.0% to 17.3% this month. It feels always good to win one.  MFI does tend to be streaky.

Guess what?  The next 3 portfolios are all leading as well (although most recent 8 are trailing).  I am happy about that, even if my personal results have been struggling lately.

Here are the 50 stocks in descending performance order (from the portfolio that just hit a year):


Stock  Initial Price   End Price  Percent Change  Mkt Cap 
RCM                3.71           10.16 173.9%            389
USNA              57.70         120.55 108.9%         1,421
SYNT              19.65           40.98 108.5%         1,644
DIN              41.11           81.32 97.8%            773
BPT              18.13           34.50 90.3%            480
FOXA              26.15           46.33 77.2%       48,831
MCFT              20.38           35.88 76.1%            380
NCMI                6.25           10.59 69.4%            423
FFIV            120.56         199.42 65.4%         7,661
SCMP              11.80           18.00 52.5%            547
CPLA              69.09         104.00 50.5%            819
DISCA              21.29           32.00 50.3%       12,306
ESRX              63.32           95.01 50.0%       36,570
CSCO              32.58           48.65 49.3%     167,578
TIME              13.47           18.50 37.3%         1,344
HPQ              19.49           25.77 32.2%       33,333
AVID                4.54             5.93 30.6%            187
MSB              20.90           26.70 27.7%            302
VIAB              27.11           33.76 24.5%       11,203
MSGN              21.20           25.85 21.9%         1,592
LEE                2.20             2.67 21.6%            125
BOJA              13.50           15.70 16.3%            498
EGRX              59.64           69.33 16.2%            967
IPG              20.05           22.87 14.1%         8,176
AMCX              58.47           66.34 13.5%         3,771
ABC              81.32           92.23 13.4%       18,617
TRNC              14.53           16.33 12.4%            478
IDCC              72.47           80.00 10.4%         2,560
UTHR            117.19         127.88 9.1%         5,460
AMAG              18.45           20.00 8.4%            651
MD              43.12           46.66 8.2%         4,031
NHTC              23.02           23.28 1.1%            271
HRB              25.49           25.76 1.1%         5,536
VEC              30.84           31.16 1.0%            342
GHC            579.82         581.30 0.3%         3,272
GILD              78.65           77.21 -1.8%     105,812
OMC              71.67           67.97 -5.2%       17,110
TGNA              13.02           11.97 -8.1%         2,858
MNKD                2.17             1.83 -15.7%            227
NLS              16.90           13.93 -17.6%            520
GME              18.82           15.27 -18.9%         2,093
MPAA              29.46           23.45 -20.4%            571
DLX              71.65           56.92 -20.6%         3,528
DHX                2.60             2.05 -21.2%            131
PDLI                3.39             2.63 -22.4%            522
AGX              64.99           42.95 -33.9%         1,045
SQBG                2.99             1.67 -44.1%            189
VVUS                9.90             4.41 -55.5%            105
CJREF                8.68             3.27 -62.3%         2,121
ICON                5.69             0.31 -94.5%            325


Three stocks over 100% really helps.  And only 5 stinkers losing 30% or more (although ICON was one of all-time worst). Recall long term stinker rate is 14% or so. Here is a listing of every tracking portfolio back to 2006:


Date MFI R3K Lead
1/6/2006 16.0% 10.9% 1
2/17/2006 21.2% 14.6% 1
3/29/2006 13.0% 9.6% 1
4/7/2006 10.3% 12.1% 0
5/12/2006 20.4% 18.6% 1
5/31/2006 29.2% 23.3% 1
6/30/2006 22.4% 20.0% 1
7/31/2006 19.7% 17.3% 1
8/31/2006 13.0% 13.3% 0
9/28/2006 12.7% 14.6% 0
10/27/2006 10.3% 12.0% 0
11/29/2006 -0.3% 4.8% 0
12/28/2006 -6.9% 3.4% 0
1/26/2007 -10.2% -6.6% 0
2/27/2007 -3.7% -1.0% 0
3/26/2007 -9.8% -5.5% 0
4/27/2007 -10.9% -5.0% 0
5/29/2007 -11.5% -6.3% 0
7/3/2007 -30.0% -15.6% 0
7/30/2007 -19.9% -11.5% 0
8/30/2007 -12.5% -8.7% 0
9/27/2007 -19.0% -18.2% 0
11/2/2007 -40.4% -34.3% 0
11/28/2007 -40.1% -38.3% 0
12/28/2007 -36.3% -40.0% 1
1/25/2008 -36.4% -35.9% 0
2/26/2008 -51.7% -41.5% 0
3/24/2008 -40.9% -36.8% 0
4/25/2008 -25.6% -31.0% 1
5/28/2008 -22.2% -33.6% 1
7/2/2008 -11.7% -25.3% 1
7/29/2008 -10.5% -20.9% 1
8/29/2008 -13.8% -17.9% 1
9/26/2008 -4.3% -10.0% 1
10/31/2008 18.7% 13.9% 1
11/26/2008 50.9% 27.7% 1
12/26/2008 48.9% 32.3% 1
1/23/2009 59.3% 36.4% 1
2/27/2009 92.8% 55.6% 1
3/27/2009 85.8% 48.1% 1
4/24/2009 69.7% 45.8% 1
5/29/2009 31.8% 22.8% 1
6/29/2009 21.3% 24.0% 0
7/29/2009 19.5% 15.9% 1
8/28/2009 7.4% 8.8% 0
9/25/2009 12.6% 12.4% 1
10/30/2009 22.7% 18.3% 1
11/27/2009 24.3% 13.6% 1
12/31/2009 23.7% 18.1% 1
1/22/2010 19.0% 20.6% 0
2/26/2010 18.6% 23.6% 0
3/25/2010 10.0% 15.4% 0
4/23/2010 7.1% 11.4% 0
5/28/2010 19.3% 25.4% 0
6/29/2010 16.7% 25.7% 0
7/29/2010 5.4% 20.1% 0
9/2/2010 7.3% 10.1% 0
9/24/2010 -4.3% 0.3% 0
10/29/2010 -2.9% 10.4% 0
11/26/2010 -8.5% 1.4% 0
1/3/2011 -11.4% 0.1% 0
1/28/2011 -7.6% 4.9% 0
2/25/2011 -5.5% 5.0% 0
3/24/2011 -4.4% 7.4% 0
4/21/2011 -16.0% 3.2% 0
5/27/2011 -12.0% -0.4% 0
6/24/2011 -9.5% 5.0% 0
7/29/2011 -4.3% 8.1% 0
8/26/2011 12.0% 21.6% 0
9/30/2011 23.5% 29.6% 0
10/28/2011 0.4% 11.5% 0
11/25/2011 13.9% 24.0% 0
12/29/2011 9.9% 15.9% 0
1/27/2012 7.4% 16.6% 0
2/24/2012 7.8% 13.3% 0
3/23/2012 9.1% 15.2% 0
4/27/2012 10.5% 15.3% 0
5/25/2012 23.4% 27.5% 0
6/22/2012 26.1% 24.6% 1
7/27/2012 30.4% 25.7% 1
8/24/2012 26.0% 19.8% 1
9/28/2012 39.3% 22.1% 1
10/26/2012 48.3% 28.9% 1
11/23/2012 45.7% 32.1% 1
12/31/2012 52.3% 33.0% 1
1/25/2013 39.5% 22.0% 1
2/22/2013 46.5% 26.4% 1
3/28/2013 40.1% 21.2% 1
4/26/2013 35.0% 20.5% 1
5/24/2013 20.4% 19.2% 1
6/28/2013 26.9% 24.1% 1
7/29/2013 17.8% 19.0% 0
8/30/2013 17.5% 24.6% 0
9/27/2013 12.9% 17.7% 0
10/25/2013 11.8% 15.4% 0
11/29/2013 12.3% 15.6% 0
12/31/2013 12.7% 11.9% 1
1/31/2014 14.2% 13.0% 1
2/28/2014 15.4% 13.9% 1
3/28/2014 6.1% 12.3% 0
4/25/2014 8.6% 15.8% 0
5/30/2014 5.9% 11.7% 0
6/27/2014 2.5% 9.2% 0
7/25/2014 3.3% 8.7% 0
8/29/2014 -2.2% 1.0% 0
9/26/2014 -0.6% -0.9% 1
10/31/2014 4.3% 4.4% 0
11/28/2014 -2.9% 2.9% 0
12/31/2014 -9.3% 0.3% 0
1/30/2015 -12.4% -2.8% 0
2/27/2015 -19.0% -7.3% 0
3/27/2015 -17.1% -1.9% 0
4/24/2015 -15.4% -0.8% 0
5/29/2015 -14.1% 0.1% 0
6/26/2015 -8.7% 0.4% 0
7/30/2015 3.96% 4.02% 0
8/28/2015 5.6% 10.2% 0
9/25/2015 6.5% 13.8% 0
10/30/2015 2.0% 4.0% 0
11/27/2015 8.9% 8.4% 1
12/31/2015 13.7% 12.6% 1
1/29/2016 22.6% 22.4% 1
2/26/2016 27.8% 25.4% 1
3/24/2016 26.5% 19.6% 1
4/22/2016 13.7% 14.8% 0
5/27/2016 14.3% 15.6% 0
6/30/2016 23.2% 16.1% 1
7/29/2016 17.1% 16.0% 1
8/26/2016 10.6% 14.6% 0
9/30/2016 18.6% 18.5% 1
10/28/2016 18.3% 24.1% 0
11/25/2016 7.4% 19.2% 0
12/30/2016 4.7% 20.5% 0
1/27/2017 10.5% 30.3% 0
2/24/2017 7.6% 17.4% 0
3/31/2017 6.4% 13.6% 0
4/28/2017 5.8% 13.8% 0
5/26/2017 11.1% 15.1% 0
6/29/2017 11.1% 14.7% 0
7/28/2017 12.5% 16.1% 0
8/25/2017 28.8% 21.5% 1
9/29/2017 20.0% 17.3% 1
10/27/2017 20.9% 14.6% 1
11/24/2017 16.2% 13.3% 1
12/29/2017 14.9% 10.3% 1
1/26/2018 3.0% 3.1% 0
2/23/2018 6.5% 7.4% 0
3/29/2018 8.6% 11.1% 0
4/27/2018 4.4% 9.9% 0
5/25/2018 4.1% 7.3% 0
6/29/2018 0.7% 7.1% 0
7/27/2018 2.5% 3.6% 0
8/31/2018 -1.2% 0.2% 0

Dividend Subset

My backtracking has shown that MFI stocks that pay a dividend seem to do better. I believe this is because a dividends infers that income flows are more likely to be sustainable.  This tends to extract stocks with large one time payments.  That was true again this month-year. My dividend MFI portfolio (which are stocks I track with a yield of 2.6% or greater) were up 24.5%.

Here are those winners:


Stock  Initial Price   End Price  Percent Change
DIN              41.11           81.32 97.8%
BPT              18.13           34.50 90.3%
NCMI                6.25           10.59 69.4%
CSCO              32.58           48.65 49.3%
HPQ              19.49           25.77 32.2%
MSB              20.90           26.70 27.7%
VIAB              27.11           33.76 24.5%
IPG              20.05           22.87 14.1%
HRB              25.49           25.76 1.1%
GILD              78.65           77.21 -1.8%
OMC              71.67           67.97 -5.2%
GME              18.82           15.27 -18.9%
CJREF                8.68             3.27 -62.3%

Finally, I like to track cash as it is more "honest" than percentages as if you go up by 25% and then down by 25%, that is a different result than up by 5% then down by 5%.  So I track what you would have today if you had spread $100,000 over the first twelve portfolios evenly. I think it is obvious why my formula approach is a function of dividend subset.


Category Value
Total      237,276
Total Russell 3K      288,975
Dividend      557,213